Earnings call transcript Q2 2023

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Operator

Welcome to the RCM Technology Second Quarter Earnings Call. I will now turn the call over to Kevin Miller, you may begin.

Kevin Miller

Good morning. And thank you for joining us. This is Kevin Miller, Chief Financial Officer of RCM Technologies. Brad Executive by today joined Vizi, Chairman. RCM’s I'm

currently will statements. statements rapid matters The presentation and based in of contained may to forward-looking beliefs call this information assumptions, the estimates, forward-looking Our materially information change And future. subject contain in estimates our and beliefs, changes. to are in available us. on Many these is these the assumptions

statements, Please For to and the on more forward-looking the factors forms subject. our and filed with on and which uncertainties reports well the they're XX-Q SEC, that releases from X-K see we press we risks, periodic time-to-time. other and as information XX-K our issue as that

an overview RCM’s during now quarter. performance turn of the the will Brad over provide Vizi. to operating I to call Executive Chairman

Brad Vizi

morning, the to everyone. the timing, to due with be loss impacting professional half. Consistent off believe platform we discussion, marketplace. the client's program service a our in project year the to highly after in unexpected decision Kevin. differentiated first Thanks, maintain made Good stride starting building slow what and and key a prior We

Our of growth prognostications perpetual decision the to easy markets drumbeat made portfolio and ignore capabilities secular of one. the an economic strong

taking the starting various excited Healthcare with we our economic more been further Since as of RCM’s made bar discuss healthcare others advantage progress of has of raise detail long-term business. short-term divisions, aspects continues I we last strengthen enhance brakes. each with to would in Division knew the to spoke, our opportunities and in approach the the we more across am division. a in fact, In any while returns to position scare, tap be to take business and

areas. best in solutions staffing on commitment key several has led to and us to focus Our services delivering class

have approaches, dedication implementing positive and and districts seen and and their ability schools. improving health evidence-based in children behavioral in learn foremost, the addressing in too and and steadfast significant our outcomes innovative school strides to nationwide. made behavioral the of very By we healthcare mental First delivery facing growth to has succeed challenges new

school Moreover, our our client need, have reach, initiatives more allowed in local have us expand with communities facility impact. effort our clients sustainable providers. to and not students and to penetration and strengthened only bolstered healthcare but our These making ties also and broadened a serve patients

the significantly in applicant invested also paved app user efficiency. to operational has new service providers our expedited have the an of way candidate optimize the We overall including better experience. experience onboarding enhance launch technology This and digital and of transformation, for

strategy the healthcare Furthermore, has and as a our us reinvigorated branding trusted solidified competition apart setting provider, from of avenues growth. forward-thinking new our opening position staffing and

we and to committed improvement, educational trends continued to behavioral As success. attuned we be healthcare will remain look and our staying new of and excellence ahead, embracing in technologies continuous pursuit pivotal emerging our strengthening

strong a ever-evolving dedicated landscape. are a to in business seize and new and driving our heights education new our foundation ability confident to With challenges in the healthcare navigate and opportunities, team, we

division has that a project we solutions to our Sciences On continue reached grow believe the managed point IT and business. Life tipping we front, as and

comes more with XX a its and margin of areas, number profile. revenue X% a these had and Just division ago, robust QX in grown has in QX, XXXX less the more XX% months business has to the XX% than much-improved than stream in

offering second continues we the contract and long-term quarterly partnerships revenue its to basis the growth. a XXXX, analyzing its when XXX key HCM the within of top securing same margin in improved periods over Again, core in galvanize by client's within clients on partner becoming number sequential points XX% one offering. gross flagship

think has fast-growing raise to continues Our required within we success the our a this clients our growth of as base. rapid grow early in innings support. core continue and We the the to of client is share group of bar the team increasing HCM levels

has and help Our quickly and practice target several service series Life assessments a operations, practice, a key processes Sciences clients new of improve commercial quality introduced to data Year New offerings management. including

practice Sciences sales and Life has secured three Our service also its strengthen managed leadership new to continues and clients personnel.

to continue beyond. remainder be We for the and optimistic of XXXX

selected a northeastern results growth RCM XXXX. be promised, United As it by The the as a within mentioned serve team portfolio. client’s this first and through QX has firm for project half amount a a partner trusted tipping Energy as strong and believe group I This States. new our Services QX a contract strategic wins to backlog for the of one substation sustaining the delivering earlier, where continuous will pillar reached closed results of utility added significant point large major year-after-year. being engineering major to was possible was the in in made with

strengthen to RCM Across future. communities its to energy globe, And our is the expand investment to proud electricity the in support clients driving and the is evolving new services group’s projects demands. transition

clients And Our large solutions. of a on is projects our clients. to turnkey European to developing utility been to through strong team Focus well enabled complex has energy complete services developing take sturdy project a on foundation with disciplines provide engineering footprint across serve the has all management QX. our foundation building more and list growing

of backlog to continues XXXX team strong consistently our is list. be expand the half and The as opportunities second convert client to expected into

of and important the came line our over again with strengthening in of elements relationships. to produce plan. for additional was Second advanced form the execution, in the quarter fuel. of engineering business critical aviation sustainable on results Focus were an backlog and three facility in months ethanol project growing the past One industrial increase process our

noticeable had acceleration new projects from a quarter, stemming and We throughout pipeline in both the established customers. with

in our the revenue in are global growth and of evidence presence is expected funnel plans Aside potential from RCM’s our this the XXXX significant strong realized transition. market that energy the expansion diversification and being sales strengthening

house is projects key and a RCM Thermal RCM demonstration lab making industrial the testing to team advance engineering and see performing future of community educational our clients, was office to rewarding held for from It scale members through variety continues vendors, in facilities. Kinetics impact and to universities, unit of the production lab July. the a XX,XXX square process families while Many learn and foot friends joined of new within local the demonstrations. open to us

and projects how local by time business that third These in in company highlight many saving state-of-the-art recovery and demonstrations we the journal de market lab quality markets serve. Aerospace is across Buffalo a seeing Business our output, The clients the with money provide the also approach higher our risking featured and while team was history Defense quarter. can First.

the After the unexpected accelerating defense last year, activity end client the with and program and a key experienced and clients rose loss to aerospace team business development occasion, new at of our new relationships added the achieving deepening existing with Thus by well of way of has Division the clients. to eight clients in XXXX. end already on XX far XXXX goal the

base within clients well and tripled them vessels hires expansion the manufacturers, domain. see compared component quarter of and our the second we the aftermarket production in client customers, as of new assisting number the in note, to quarter Defense includes part aerospace as on the new Also floor almost with This customers across new specifically vertical have first XXXX.

much and strongly XXXX. the and positions organization arenas The existing desired our breadth depth expansion and core clients clients expertise, us for with of new to provides and new

see our one traction entire across resources our begun strongest opportunity potential also clients We have spectrum spanning on engineering OEM largest into to the of awards of from with XXXX.

hybrid have clients, expands throughout aftermarket, our proven United we sole design well across contract digital space been multiple where we flexible prowess, of clients conversion and for now one source awarded services the with States. We In support with in as methodology from now conceptual aftermarket track scenarios. a as have are model-based and our a providing addition, which definition our record expertise an through

President provided, Once market solution the Vice we the SXXXXP, factor offering realization we the our publications addition now reach we differentiated time into of analysis, broadens an support full decided management, group feedback. was support and to believe data material is touting customers of SXXXXF, the marketplace. the SXXXXL, was service apparent, it which S With the logistic SXXXXD, in maintenance, have our aftermarket is our in new beyond our SXXXXM, Senior that

we of the adversity, face back serve XXXX at as on shining aerospace and culture RCM in defense in create of quality even value look will example and growth. out, believe business the our on improvement, day our a and upgrading when work, focus I through day to whilst continuous incessant of

in who our Kevin, cover capital will results a financial take detail, on our touch Before on moment I call side. allocation to the will more turning progress to the

shares. to over X,XX,XXX shares bring quarter, year-to-date second X.X repurchased the nearly share million During we repurchase our

improvement price continuous repurchase $X.XX of business. over three of sheet committed business the balance model allowed generating our clean culture our with commentary, the company and of us the Our approximately dedicated to and at cash fourth years objectives. Consistent I've normal as continues high XX% a an average the seasonality, QX last per year, into up to the share. prior to increase long-term a account in consistent setting through double-digit move strengthen quarter, we business earnings healthy trajectory taking with our

QX, call the over discuss to Kevin will detail. I XXXX results Now in the to return more financial

Kevin Miller

Thank you, Brad.

million results XXXX. for first the consolidated second quarter the our revenue with of XX.X Regarding was quarter flat

Sciences sequential increases Technology and in offset our expected quarter by second we and As decline the healthcare we Life engineering Information segments. by

revenue Healthcare entirely due late clients in several clients and The our closing by closing second seasonal to school our school was May, significant of quarter all decline of in June.

see We QX. greater in declines will seasonal still

up XX school starts non-COVID XXXX incredibly revenue. school about in in limited exceeding this We're clients gear we to I XX fiscal school had want various school XXXX September revenue. when only excited upcoming XXXX, we clients. August clients with on business. for had fiscal some In six that our give active year to XXXk While year. we over That compares XXXk and school related information the for XXXX, in about

over XXXX driven QX energy by For in nice in XXXk XX least sequential XX in We at revenue engineering with school the in a revenue. saw we wins. contract fiscal increase 'XX uptick mainly services expect clients

the engineering sequential throughout increases our We expect sequence XXXX. group of rest to

Sciences Brad our increase a drive service our managed segment to As sequential Technology and growth. Life offerings our as Information discussed, had nice continue

this may forward. also quarter. saw We at from XX.X% margins gross revenue outstanding Gross quarter the be upper see gross watermark, a a in XX.X% segment going second sequential to Engineering saw increase. first we IT While with margin and the margin gross do as was Sciences our high small Life margin expect thirties flat uptick in performance the

However, we performance forward. expect better going gross margin

We are twenties. targeting upper the

off in the performance and shift school due Healthcare mix adjustments. to discrete second quarter, several margin a gross June closings, was primarily

target margins well. as healthcare better twenties upper gross We also expect in the forward going and

to to look experience XXXX, we second underlying of growth the As continue half to healthcare its trend. expect sequential we

line top quarter sequential in set a see every do will the we we year. closings, third decline school seasonal to due However, as

We see XXXX. quarter quarter be to many school contracts, best expect the fourth recently excited the we're results. our awarded for With to very so

to Engineering sequential Sciences the fourth our Information both quarters. see and and expect We Technology third Life increases and segments in

expect risk quarter fourth While the in there the projects is for all groups. our the of sliding a engineering always substantial uptick to of right, large we three

remarks. EBITDA the quarter XXXX, see rate compared will and a growth In lining And our least XXXX. summary, open as QX we questions. prepared that to this are in believe QX, expect we time, for XXXX. an At This be ‘XX up In nice to run double-digit to XXXX. into we fourth EBITDA will at concludes call for fiscal heading we similar impressive

Operator

come first our from like looks is question it to Alex Rygiel And Riley. with going Instructions]. B. [Operator

is line Your open.

Alex Rygiel

Very morning, quarter. Good nice gentlemen.

Kevin Miller

Thank you. morning. Good

Brad Vizi

Alex. Thanks,

Alex Rygiel

as First last at that? quarter, look Obviously, a refine that what third Healthcare in that relates seasonality it difficult to little the COVID. us two, mean you you can bit to business normal three given years, help by over the the what

Kevin Miller

Yeah, have starting to we and past schools of difficult, started a most we, new and September. on coming decline, exact we big in pretty, projection especially pretty when dipped. with some typically on, they've QX. of the An them all coming see in the is Typically QX August in schools that our

Alex Rygiel

-- then and Okay,

Kevin Miller

number, tough to see give to under million, will XX, in an in just certainly exact where QX. a range. XX but sort point, XX, give to little it maybe It's XX in. to XX comes finer that But you of be We'll

Alex Rygiel

would the half Helpful. Last suggest the in And year, second year. then twenties. that you were thirties the segment your margin low high of in in commentary

just mix variance of or it the is something? is So, sort

Kevin Miller

to of way gross in a improve fair of the that uncertainty created, think a on I is, think we basis, have confluence margin not that that amount should healthcare, good a because, contracts. always we indicative we're the number just did healthcare a for The we factors margin. a Yeah, XX.X that's margin. that the year-to-date. lot gross of a you I And, But margin healthcare there's go pretty around I had in actual QX think new of is looking the about forward think thing

they're pretty the be the good And But surprised we really these XX% a QX certainly, we're never QX know margins think that going lot start I indicates exactly a pushing to how And of new with hopefully range. in our to that. if up XX.X% area. are towards I in would of XX% schools. top and

Alex Rygiel

It’s you, good. very much. Thank

Operator

Our is Bill going from next Sutherland question Benchmark. to come from

open. is line Your

Bill Sutherland

Specialty Thank just from the hey tell tell Kevin, Healthcare. revenue you, you in clients? on me, the us quarter Great I'm guys. work. can Things school or sorry,

Kevin Miller

that I need open. that. Actually have to grab don't

another You question? have

Bill Sutherland

how year, last last and kind and over Yeah, the Over were I X,XX,XXX? year when this quite with get those X,XX,XXX. year, through clients you you of, many? XX didn't running clients

Kevin Miller

had XXXk six. and We with we to had about XX -- over had when over we had Yeah. we about compares only XX,

that's So the pick since clients. as XXXX. And, new year. we've many and, has quite pre-COVID obviously a XXXX, school so business changed And a added bit

Bill Sutherland

terms it's given schools you you're are, roles? broader in sauces? it Are like winning the that And of the deals just, finding sounds the that in

Kevin Miller

we is But just the we're but to went one when Bill. every year, school, just health. Yeah, school we to entering we with second. usually sometimes get when school behavioral -- different school, went a sometimes Frankly, introduce next we to service, it's nursing, oftentimes, it's

service. to school give of sort And so school, usually, often So, a it's when we blanket to to hard you expand systems, to different the following many different it's it's another we there's But from a enter into answer. one nuances the service. get -- year

Bill Sutherland

How that this Science, gross And that tied seeing optimally expansion margin, Is when nice is Or to those something just Life run I'd in Sci. of it's can pricing? in pieces you expansion about? Life the say and business? those, you're of assume

Brad Vizi

made ago, in and you that Bill. stickier towards mixed to these fact, strategic -- primarily Life at pricing managed business, deliver to years a you a naturally, all, solutions Sciences more and move the in this decision model. wheels about business. Staffing we profile. when actually, it as driven. question continue And can with to as be a service-based Not motion good was value is at Yeah, And, were higher clients. more comes as And, IT set it's three the margin And, primarily looked well,

So, that as your part progression, naturally, of evolves. team

saw different outside we Life IT. So, throughout this obviously, parts of Sciences of the portfolio, and

the managed that they're necessarily talent has focused point I staffing And have on tipping a And point. set wouldn't I is where a think business same naturally, lot where that think in that folks driven the the you solutions on hit at, personally is of you of of would this and the lifecycle kind services.

out. and dynamic And and is, in build fortify it the team, confidence to it the further me the continue we as there so gives drivers

portfolio area, So, forward. going expect [Multiple that's things Speakers]. one but one part exciting of we the

Bill Sutherland

Kevin. Yeah. Go ahead

Kevin Miller

going the if have school go But you you to ahead. questions give Sciences, more some on was just Life stuff. I

Bill Sutherland

percent was as managed I just, ballpark? gotten where revenue, kind Well, services of curious of you've a

Brad Vizi

Yeah.

So, when at under half a from services, managed under, at you roughly and we're up point. this half X%. little solutions look under well or Overhead,

Kevin Miller

$X over of the a in QX million. we school school And were million the shade just So, non-school. XXXX was revenue XX.X for

Bill Sutherland

You said XX.

this You meant year?

Kevin Miller

about Yes. meant I year QX sorry of that. this ’XX

Bill Sutherland

XX.X.

Kevin Miller

was Roughly XX% of our cool. business, in QX

So, QX. it's pretty with consistent

Bill Sutherland

Okay. trend business that were you the of plays that saw side on I guess non-school kinds pure your in reported? same

Kevin Miller

that had some back, we was mean, going lines almost that client their decline, there really much see one pretty it we a to We're their bit think sequential driven a of little -- though. forward but of was by some entirely expect scaling up. I I Yeah, expenses. growth of

we've So room of -- business. got grow to I, plenty our non-school

Bill Sutherland

or dividend guess That I deployment, to had opposed are dividend, anything very on be path a related one or continue Last successful that. special you've tap with bid to tender Okay. might outside you're to as of going that to on? anything this

Kevin Miller

And think see at Yeah. makes me open easy. my kind of -- Bill, attractive fast trading that all a screen real let pretty look price. XXXX. are if But, avenues the All very And, is the here. avenues. we decision stock at

Bill Sutherland

a lot, Okay, for thanks guys, sure.

Operator

[Operator Frank question from come Our to Kelly. Instructions] next going is

open is line Your

Unidentified Analyst

are guys? Hello, Hi, guys. Kevin. Hi, Brad. you How

Kevin Miller

Good.

Brad Vizi

Very good.

Unidentified Analyst

Good that in well. as striking the Science XX% Life think sectors I has hopefully, to almost come to and IT hard. go. That in That's has will to great. marked come other pretty And line go the

question, one shift can add if to As we over to balance we value, the sheet. the,

over and in we obviously, -- over us not some AR you AR why is? What help And, king, the at obviously interest to Q? the help shed as XX% gross also or to Looking understand? you cash us in the a costs? understand can drives on had P&L what's increase light And help it me Can happening is AR?

Kevin Miller

us. frank Sure, really a appreciate, AR one as and DSOs sure. to you, And we -- DSOs there's get high not at come So, sure QX, as which dollar reason there's expect are amount. too as can with just bring opposed the opposed high couple, conclusion, low be But I'm to for there's and is Frank, whole Well you down. as and a is DSOs to the the the the a to I and seasonal -- you there's, them QX same we'll is look QX just quarter but to it, for

be QX And to So, I in dollars. we in DSOs well find the expect pretty should to in much nice as see QX receivable a better

see the DSOs you cash cash poor receivables We about flow despite where year a cash or because in And not for in in we'll really I'm decrease did But QX. the activities. a QX. flow in the we're on come AR. good our at in depending asked glad may revenues we're for I'm QX, from see in performance in -- XX.X Obviously, million decrease QX. may obviously we see confident flow operating trade pretty

So, but receivables cash we're we we pretty happy with flow will. with overall the and can do the better

Unidentified Analyst

and to versus I But -- we're really guys borrowings at Great, looking that then down QX we DSOs just are It seems interest things sure at are you I'm just not in we're translates capitalizing. opportunity yeah, an QX? that. where and like like

Kevin Miller

I numbers me, front in too but exact of don't they're have the Frank, high.

and flow and said. in -- press mentioned, I our with if I sheet there, down. they're need and job we've as And important less see interest half this year, to receivables. I will goes But, balance our And, debt they all expect that, the our to we our just takeaway shares, be proud relative we're obviously, more of, good. think cost where and and better going debt particularly down So, but up, is down. really debt because nice purchased. as with shares we're can But happy the up, right pay drive looks to is a come is to if cash we're they buying release, the to And, that just second the happy now, pretty looking debt in do drive we QX. of our And in to to, interest. Right, always we're

Brad Vizi

there points, data if just other throw I Two can. in I

anticipate of on front, the next being debt close debt the obviously, aside, clicking the in fast far. I if good levels we couple have So, so been addition as to modest share that, quarter repurchase all. relatively allocation setting of would also, decisions quarters, after forward capital at have our collections But the

point into highlight move But your fourth, so balance pretty and relevant, we -- so, good the sheets very at. where is the As felt we the

Unidentified Analyst

it And direction. I appreciate heading. good a we're That's like And where that I sounds all. no, Great, understood. see very

Brad Vizi

you, Thank Frank.

Operator

any doesn't are queue. more Okay, like questions Instructions] [Operator there look in

closing over turn it to you remarks. any I So, will for back

Brad Vizi

Thank next our conference Thanks, you for November. look update operator. RCM quarter in call. second We attending forward to

Operator

This concludes call. your

You may now disconnect.

RCM (RCMT) 10 Aug 232023 Q2 Earnings call transcript